While the carbon reduction movement helps, booming hi-tech stocks rarely take into account the difficulties in transforming entrenched industry technology.
And so when iron ore “newcomer” Andrew Forrest announced that he was investigating the establishment in Western Australia of a “green steel” plant, the iron ore veterans in BHP and Rio Tinto broke out into a wry smile.
But WA’s traditional “royal family”, the Courts, must have rejoiced at the announcement, which offset to some extent the adverse Australia Day awards publicity for Margaret Court.
These local Australian reactions were, of course, overshadowed by the fact that Forrest was alerting his customers---the global steel industry ---- that steel as well as the closely-linked cement industry, have plant systems that are not sustainable in a carbon-reducing world.
Steel and cement each produce about eight per cent of the world’s carbon outputs. Despite the barriers there will need to be “green cement” as well as “green steel” if the widely-canvassed global carbon reduction targets are to be achieved.
Why are the Courts celebrating the Forrest plan?
We need to go back to the 1960s when the iron ore industry was in its infancy. The great driver of its development was the late Charles Court who, as Western Australia’s industry minister, had a vision that WA iron ore and gas could spark an industrial complex either in the Pilbara or in the Kwinana region near Perth. He insisted that great Australians Ian McLennan at BHP and Maurice Mawby at CRA (now London-controlled Rio Tinto) sign up to an obligation to undertake their best endeavours to start secondary processing of the ore.
Charles Court would be bitterly disappointed with the current WA iron ore industry which, for the most part, simply digs up the ore and ships it to China, Japan and other countries. A portion of the WA workforce is employed on a fly-in fly-out basis. The great industrial based WA communities that he planned simply did not happen.
Forrest’s “green steel” plant, to be driven by “green hydrogen” extracted by electrolysis of water, is exactly the sort of development Court hoped to achieve, without having any inkling of the lower carbon movement that was to become a great force.
Charles Court became premier of Western Australia. He was followed as premier later by one of his sons Richard. Another son, Barrymore Court, married tennis great Margaret Smuth.
The wry smile from BHP and Rio Tinto came because the two giants took the McLennan and Mawby obligations to Charles Court very seriously and it cost them a lot of money.
Prior to the Londoners taking
control of the Australian operation, CRA developed a technology called HiSmelt and erected a plant at Kwinana. The problem for HiSmelt was that it was competing with conventional steelmaking and did not earn good returns. When London took control of the CRA Australian assets and operations they shut it down.
BHP went even further to honour the McLennan undertaking and invested $2.4 billion in a massive hot briquetted iron (HBI) complex in the Pilbara, which extracted hydrogen from gas to reduce the iron ore to iron. The HBI plant hit severe problems and could not gain a return. BHP wrote the entire investment off at a time when it had lost billions in its Magma US copper takeover.
The HBI plant continued to operate until there was a fatality and BHP shut it down and dismantled it.
And so, until the latest Andrew Forrest announcement, the great Charles Court vision was a dream.
Andrew Forrest can learn a lot from the BHP and CRA - Rio Tinto experience.
To be a major force in steelmaking Andrew Forrest’s “green steel” will need to be at least competitive with conventional steelmaking, which will almost certainly lower its carbon content so the blast furnace /steel furnace technology and plants can survive.
If the “green steel” technology can be competitive then for massive complexes to be developed remotely in WA, they must have a global advantage because the Chinese and Japanese will want to develop plants in their own country.
Artificial intelligence and computer-generated 3D models greatly improve and speed the development of technology. In the last century new technology development was a slower and much more hazardous process, which neither BHP nor CRA had the base skills to deliver success.
Today’s technology developers are inspired by the fact after more than 100 years of the piston engine dominating transport, we are seeing electric vehicles beginning to sweep the world.
They will replace the piston engine more rapidly than anyone could have imagined. That development was made possible by the new technology aids plus the lower carbon movement.
This will inspire those who want to back the Andrew Forrest plan.
If he is successful then the revolution in global steel making will mean that the enormous investments in blast / steel furnaces will go in the same direction as the old HBI plant.
But for that to happen we will need a technology breakthrough of gigantic proportions.
